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Given the following information for Watson Power Co., ?nd the WACC. Assume the company’s tax rate is 35 percent. Debt: 10,000 6.4 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments. Common stock: 495,000 shares outstanding, selling for $63 per share; the beta is 1.15. Preferred stock: 35,000 shares of 3.5 percent preferred stock outstanding, currently selling for $72 per share. Market: 7 percent market risk premium and 3.2 percent risk-free rate.
Cellular International zero coupon bonds (par value $1,000) mature on April 21, 2020. Calculate the yield-to-maturity if an investor purchased one of these bonds on April 21, 2014, at a price of $650.
The efficiency gains resulting from a just-in-time inventory management system will allow a firm to reduce its level of inventories permanently by $379,000. What is the most the firm should be willing to pay for installing the system?
A pension fund manager decides to invest a total of at most $45 million in U.S. Treasury bonds paying 5% annual interest and in mutual funds paying 9% annual interest. He plans to invest at least $5 million in bonds and at least $ 10 million in mutua..
Energy Tech company issued an 8% (semi-annual payment) 20 year bond 5 years ago. If the yield of similar bond today is 6%, what is the bond price? What is the current yield?
The five steps in financial planning, forecasting internal/external finds is critical. With today's economic and interest rate market conditions, along with the volatility of the capital markets, what factors would you emphasize when you are preparin..
Draw a diagram showing the variation of an investor’s profit and loss with the terminal stock price for a portfolio consisting of One share and a short position in one call option. Two shares and a short position in one call option. One share and a s..
There are two parties in any lease contract - Lessee and the lessor. To a lessor, a lease analysis involves a capital digesting analysis of the property or equipment to be leased. The lessor's decision is either to purchase and lease-out the asset, o..
You take out a 30-year $300,000 mortgage loan with an APR of 8 percent and monthly payments. What are the monthly payments? In 16 years you decide to sell your house and payoff the mortgage. What will the principal balance on the loan be? What will y..
If you were risk-averse and deciding how much to forward on an item not yet produced, you are uncertain about the spot price at production time and the eventual size of the production. What would be a good approach to forward? IE. always sell forward..
Assuming that the stock market is efficient, is each of the following statements true or false. The stock price of Company X doubled over the past year, the stock price of Company Z decreased by over 50%. Company X is the better stock investment toda..
Saturn Corporation has just declared a 25 percent stock dividend. The stock was selling for $18 before the stock dividend. The stock will pay a quarterly cash dividend of 8 cents per share after the stock dividend. If the 8-cent dividend is maintaine..
calculate the Variable overhead efficiency variance and fixed overhead volume variance and overhead spending variance
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